Time to avoid ANZ & WPT?

[Steve]

Housing war stings ANZ (http://www.nzherald.co.nz/index.cfm?c_id=3&ObjectID=10011053)

Looks like that pre-xmas price war is starting to come home & roost...

[Lawso]

It would be interesting to know roughly what proportion of a major trading bank's earnings come from mortgage lending, and consequently to what extent they might be hurt, if at all, by an interest rate price war. Any clues, anyone?

[limegreen]

It was interesting to read the herald's admittedly NZ-oriented slant on yesterday's release. ANZ.AU hit an all time high post-release yesterday, but slipped a little, but still closing above previous weeks trading. We'll have a clearer idea when the New Zealand arm disclose tomorrow.

DISC: ANZ.AU and holder of discount mortgage rate of said entity

[Lion]

Lawso, that link given above by Steve says "Banks make 70 to 80 per cent of their money from interest" Don't know if that includes non-mortgage lending, but it gives a ball park figure.

Incidentally, the word mortgage comes from the Latin, meaning "death grip" or less literally, squeeze to death.

[limegreen]

Try credit card interest. Now there's a healthy margin for the banks!!!

[stephen]

Just a little theorising here.

Consider that banks make it expensive to refinance. Consider that given the average life of a mortgage (probably 20 years) only a small chunk of the loan book is priced at special introductory rates. My guess is that while margins on new business might be tight or non-existent, returns from mortgages overall probably aren't as badly affected just now.

I note that in the story linked to, the picture is that current earnings are flat.

I presume that future earnings are the real issue here, and that depends on how many new loans are locked in at a fixed low rate. If you can find that out, then and only then would you have a good picture of the prospects for 2006 and 2007.

[Placebo]

Sorry, not wanting to hijack the thread or nuffink, but... Lion's reference to origin of "mortgage" piqued my interest.

From Dictionary.com:


quote:Word History: The great jurist Sir Edward Coke, who lived from 1552 to 1634, has explained why the term mortgage comes from the Old French words mort, “dead,” and gage, “pledge.” It seemed to him that it had to do with the doubtfulness of whether or not the mortgagor will pay the debt. If the mortgagor does not, then the land pledged to the mortgagee as security for the debt “is taken from him for ever, and so dead to him upon condition, &c. And if he doth pay the money, then the pledge is dead as to the [mortgagee].” This etymology, as understood by 17th-century attorneys, of the Old French term morgage, which we adopted, may well be correct. The term has been in English much longer than the 17th century, being first recorded in Middle English with the form morgage and the figurative sense “pledge” in a work written before 1393.

So it seems Lion is half-right. "mor" is the original latin root, however "gage" it seems has germanic origins...

Now, back to the subject...:D

[limegreen]

According to ANZ-National Bank's disclosure today, their net income increase was lower than anticipated as a function of the interest rate war, but that they had a fairly hefty increase in mortgage value (at least in the National Bank franchise), which they argue will be good for future income growth.

[Steve]

It appears Westpac made a good short-term decision not getting involved in the mortgage price-war, but will it have an effect longer term through lower market share?

Westpac's profit rise shrugs off price wars (http://www.nzherald.co.nz/index.cfm?c_id=3&ObjectID=10112700)

[Happy]

Guys look at US listed Citigroup better than these two, the world's largest bank, it is very cheap at the moment for Kiwis at roughly a pe of 10 a dividend of 4% and pretty much 10% pa record of earnings growth for the past decade the same is expected by most brokers. Gives good exposure to the US market for relatively lower risk.